China attacks yuan bears on all fronts, force banks to hold more currency

BEIJING: China is attacking yuan bears on multiple fronts, forcing banks to hold more of the currency, driving up offshore interest rates, issuing verbal warnings and undertaking intervention that cut reserves by $108 billion last month alone. That has only emboldened some forecasters.

Rabobank Group, Natixis and Barclays are sticking to calls for a yuan slump, arguing falling reserves will weaken China's finances, while curbs on selling only bottle up pressure for declines.

Rabobank, the most bearish in a Bloomberg survey of 45 analysts , sees a 15% drop this year to 7.6 per dollar. China needs a one-off devaluation of at least 15% instead of a controlled depreciation over time, said Raoul Pal, a former hedge-fund manager who now writes a newsletter for investors.

"The Chinese need to get it over and done with otherwise this will drag out for a long time," Pal said.